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The main target for hybrids is the United States, a market that accounts for the bulk of worldwide profits for Toyota and Honda. The two companies are locked in a serious race on hybrids, with Toyota playing the hare and Honda contending that the tortoise will ultimately win the race. Honda expects to sell about 50,000 hybrids in the United States in 2005; Toyota is aiming to sell 100,000 Prius cars alone. Toyota is also selling smaller numbers of hybrids in a couple of sport utility vehicle models.
"We have sort of a submarine program, we are not getting the limelight," said David Iida, a spokesman for Honda's American subsidiary. "But in the long run, it will be very interesting to see who comes out ahead." Toyota hopes that the runaway sales success of the Prius will allow it to push hybrids into large volume production. In 2006, Toyota plans to increase worldwide Prius production to 400,000, from 300,000 in 2005. By the end of the decade, Toyota expects to be selling one million hybrids worldwide. By ramping up production of hybrids, Toyota aims to cut costs for batteries, electric motors and other parts. In turn, Toyota and Honda say they hope to reduce the cost of a hybrid car to that of a standard gasoline-powered car in the same time period.
"To make it really work, the cost has to be cut in half," said John W. Mendel, a senior vice president at Honda's American subsidiary. "The cost of the batteries is very high. We fortunately control the cost of the C.P.U., the electric motor."
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Citing competitive reasons, car company executives declined to say how much they were spending on developing hybrids. Toyota, the industry leader, is believed to have spent hundreds of millions of dollars. General Motors, seeking to share high development costs, has formed a research alliance with DaimlerChrysler and BMW. "Toyota is at this moment skimming off all the altruistic people who are doing it for the birds and the bees and for energy independence," Bob Lutz, G.M.'s vice chairman, told reporters in Detroit in September.
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http://www.nytimes.com/2005/11/04/business/04hybrid.html?pagewanted=all